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Is Purchasing Power Parity Valid in MIST Countries?

Year 2022, Volume: 7 Issue: 19, 421 - 433, 29.10.2022
https://doi.org/10.25204/iktisad.1144238

Abstract

Purchasing Power Parity (PPP) is one of the topics that has been studied with great interest in the economics and finance literature. PPP refers to the rate of change that equalizes the purchasing power of various currencies by eliminating the price level differences between countries. The validity of the PPP theory was tested by using various methods for various countries. In this study, it is aimed to examine whether the PPP hypothesis is valid in MIST (Mexico, Indonesia, South Korea, and Turkey) countries for the period 1994:01-2022:01. For this purpose, panel unit root tests are used to analyze whether real exchange rates are stationary or not. Due to the cross-sectional dependency between the units, the second-generation unit root tests PANKPSS developed by Carrion-i-Silvestre et al. (2005) and CADF developed by Pesaran (2007) tests are used in the study, which takes cross-sectional dependency into account. While the findings obtained with the CADF test revealed that the series was not stationary and the PPP theory was not valid, the results of the PANKPSS test, which considered the structural breaks, concluded that the series was stationary, and the PPP theory was valid.

References

  • Abu-Lila, Z. ve Ghazo, A. (2018). Testing the validity of purchasing power parity for the Jordanian economy. International Journal of Academic Research in Economics and Management Sciences, 7(4), 192–200.
  • Aytemiz, S., Coşkun, N. ve Tuncer, İ. (2021). Testing the absolute purchasing power parity hypothesis under non-normal errors: Rals-Lm and Rals-Adf unit root tests. Dicle Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 11(21), 57-72.
  • Bahmani-Oskooee, M., Chang, T. ve Lee, K-C. (2014). Purchasing power parity in the BRICS and the MIST countries: Sequential panel selection method. Review of Economics & Finance, 4, 1- 12.
  • Basher, S. A. ve Mohsin, M. (2004). PPP tests in cointegrated panels: Evidence from asian developing countries. Applied Economics Letters, 11, 163–166.
  • Bilgin, C. (2018). Uluslararası ticarette satın alma gücü paritesinin geçerliliği sorunu: Türkiye için zaman serisi analizi. Academic Review of Humanities and Social Sciences, 1(1), 17-30.
  • Breusch, T. ve A. Pagan (1980). The lagrange multiplier test and its application to model specifications in econometrics. Reviews of Economics Studies, 47: 239-253.
  • Büyükkantarcı Tolgay, S. ve Kula, F. (2020). Satın alma gücü paritesinin geleneksel olmayan para politikaları altında geçerliliği: Türkiye üzerine bir uygulama. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Sayı: 55, 1-20.
  • Carrion-i Silvestre, J.L., Barrio-Castro, T.D. ve Lopez-Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. Econometrics Journal, 8(2), 159- 175.
  • Cassel, G. (1918). Abnormal deviations in international exchanges. The Economic Journal, 28, 413-415.
  • Cheung, Y-W. ve Lai, K. S. (1993). Long-run purchasing power parity during the recent float. Journal of International Economics, 34, 181-192.
  • Choudhry, T., McNown, R. ve Wallace, M. (1991), Purchasing power parity and the Canadian float in the 1950s. The Review of Economics and Statistics, 73(3), 558-563.
  • Corbae, D. ve Ouliaris, S. (1988). Co-integration and tests of purchasing power parity” The Review of Economics and Statistics, vol: 70, 508-511.
  • Coşkun, N. (2020). Mutlak satın alma gücü paritesi hipotezi: Kırılgan beşli örneği. Bulletin of Economic Theory and Analysis, 5(1), 41-55.
  • Coşkun, N. ve Ballı, E. (2021). Satın alma gücü paritesinin geçerliliğinin sınanması: OECD ülkeleri örneği. Yönetim ve Ekonomi Araştırmaları Dergisi, 19(4), 1-13.
  • Çağlayan, E. ve Şak, N. (2009). OECD ülkelerinde satın alma gücü paritesi: Panel eş-bütünleşme yaklaşımı. Marmara Üniversitesi İ.İ.B.F. Dergisi, 26(1), 483-500.
  • Doğanlar, M. (1999). Testing long-run validity of purchasing power parity for asian countries. Applied Economics Letters, 6, 147-151.
  • Doğanlar, M. (2006), Long-run validity of purchasing power parity and co-integration analysis for central asian countries. Applied Economics Letters, 13, 457-461.
  • Dornbusch, R. (1978). Monetary policy under exchange rate flexibility. Working Paper, MIT Cambridge, 1-58.
  • Dornbusch, R. (1985). Purchasing power parity. NBER Working Paper Series, No. 1591, 1-34.
  • Edison, H. J. (1985). Purchasing power parity: A quantitative reassessment of the 1920s experience. Journal of International Money and Finance, 4, pp. 361-372.
  • Enders, W. (1988). Arima and co-integration tests of PPP under fixed and flexible exchange rate regimes. The Review of Economics and Statistics, 70(3), 504-508.
  • Erlat, H. (2003). The nature of persistence in Turkish real exchange rates. Emerging Markets Finance and Trade, 39, 70-97.
  • Fleissig, A. R. ve Strauss, J. (2000). Panel unit root tests of purchasing power parity for price indices. Journal of International Money and Finance, 19, 489–506.
  • Frankel, J. A. ve Rose, A. K. (1996). A panel project on purchasing power parity: Mean reversion within and between countries. Journal of International Economics, 40, 209-224.
  • Frenkel, J. A. (1978). Purchasing power parity: Doctrinal perspective and evidence from the 1920s. Journal of International Economics, 8, 169-191.
  • Gailliot, H. J. (1970). Purchasing power parity as an explanation of long-term changes in exchange rates. Journal of Money, Credit and Banking, 2(3), 348-357.
  • Glen, J. D. (1992). Real exchange rates in the short, medium, and long run. Journal of International Economics, 33, 147-166.
  • Guloglu, B. ve Ivrendi, M. (2008). Output fluctuations: Transitory or permanent? The case of Latin America. Applied Economics Letters, 17(4), 1–6.
  • Hakkio, C. S. (1984). A re-examination of purchasing power parity: A multi-country and multi-period study. Journal of International Economics, 17, 265-277.
  • Hakkio, C. S. (1992). Is purchasing power parity a useful guide to the dollar? Economic Review-Federal Reserve Bank of Kansas City, 77(3), 37-51.
  • Karagöz, K. ve Saraç, T. B. (2016). Testing the validity of PPP theory for Turkey: nonlinear unit root testing. Procedia Economics and Finance,38, 458-467.
  • Kim, Y. (1990). Purchasing power parity in the long run: A co-integration approach. Journal of Money, Credit and Banking, 22(4), 491-503.
  • Layton, A. P. ve Stark, J. P. (1990). Co-integration as an empirical test of purchasing power parity. Journal of Macroeconomics, 12(1), 125-136.
  • Li, H., Lin, Z. ve Hsiao, C. (2015). Testing purchasing power parity hypothesis: a semiparametric varying coefficient approach. Empirical Economics, 48 (1), 427–438.
  • Lothian, J. R. (1997). Multi-country evidence on the behavior of purchasing power parity under the current float. Journal of International Money and Finance, 16(1), 19-35.
  • Mark, N. C. (1990). Real and nominal exchange rates in the long run: An empirical investigation. Journal of International Economics, 28, 115-136.
  • McNown, R. ve Wallace, M. S. (1989). National price levels, purchasing power parity, and co-integration: A test of four high inflation economies. Journal of International Money and Finance, 8, 533-545.
  • Nakıpoğlu Özsoy, F. Ve Özpolat, A. (2018). Tüketici fiyat endeksi ile satın alma gücü paritesi arasındaki ilişki: MIST ülkeleri örneği. Mehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi 5(3), 839-848.
  • Narayan, P. K., Narayan S. ve Prasad, A. (2009). Evidence on PPP from a co-integration test with multiple structural breaks. Applied Economics Letters, 16, 5–8.
  • Nusair, S. (2003), Testing the validity of purchasing power parity for Asian countries during the current float. Journal Of Economic Development, 28(2), 129-147.
  • Perron, P. (1989). The great crash, the oil price shock and the unit root hypothesis. Econometrica, vol. 57, 1361-1401.
  • Pesaran, H. (2004). General diagnostic tests for cross section dependence in panels. University of Cambridge Working Paper, 0435.
  • Pesaran, H. (2007). A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics, 22(2), 265-312.
  • Pesaran, M.H., Ullah, A., ve Yamagata, T. (2008). A Bias-Adjusted LM test of error cross section independence, The Econometrics Journal, 11(1), 105-127
  • Sarno, L. (2000). Real exchange rate behaviour in high ınflation countries: Empirical evidence from Turkey, 1980-1997. Applied Economics Letters, 7, 285-291.
  • Sarno, L. ve Taylor, M. P. (1998). Real exchange rates under the recent float: Unequivocal evidence of mean reversion. Economics Letters, 60, 131–137.
  • Serttaş, F. Ö. (2022). Weak and strong form purchasing power parity tests for Turkey. International Research in Social, Human and Administrative Sciences I, 7-22.
  • Shapiro, A. C. (1983). What does purchasing power parity mean? Journal of International Money and Finance, 2(3), 295-318.
  • Şener, Ş., Yılancı, V. ve Canpolat, E. (2015). Satın alma gücü paritesi ve varyasyonlarının Türkiye için sınanması, Uluslararası Yönetim İktisat ve İşletme Dergisi, 11(25), 53-63.
  • Taylor, M. P. (1988). An empirical examination of long run purchasing power parity using co-integration techniques. Applied Economics, 20, 1369-1381.
  • Wu, J-L. ve Wu, S. (2001). Purchasing power parity overvalued? Journal of Money, Credit and Banking, 33(3), 804-812.
  • Wu, Y. (1996). Are real exchange rates nonstationary? Evidence from a panel-data test. Journal of Money, Credit and Banking, 28(1), 54-63.
  • Yazgan, M. E. (2003). The purchasing power parity hypothesis for a high inflation country: A re-examination of the case of Turkey. Applied Economics Letters, 10, 143–147.
  • Yıldırım Tıraşoğlu, B. (2014). Yapısal kırılmalı birim kök testleri ile OECD ülkelerinde satın alma gücü paritesi geçerliliğinin testi. Ekonometri ve İstatistik, 20, 68-87.

MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?

Year 2022, Volume: 7 Issue: 19, 421 - 433, 29.10.2022
https://doi.org/10.25204/iktisad.1144238

Abstract

Satın Alma Gücü Paritesi (SAGP) ekonomi ve finans literatüründe oldukça ilgiyle incelenen konularından biridir. SAGP ülkeler arasında bulunan fiyat seviyesi farklılıklarını ortadan kaldırarak çeşitli para birimlerinin satın alma güçlerini eşitleyen değişim oranını ifade etmektedir. Çeşitli ülke veya ülkelerde çeşitli yöntemler kullanılarak SAGP hipotezinin geçerliliği test edilmiştir. Bu çalışmada ise SAGP teorisinin 1994:01-2022:01 dönemi için MIST (Meksika, Endonezya, Güney Kore ve Türkiye) ülkelerinde geçerli olup olmadığının incelenmesi amaçlanmaktadır. Bu amaç çerçevesinde reel döviz kurlarının durağan olup olmadıklarını analiz etmek için panel birim kök testleri kullanılmaktadır. Birimler arasında yatay kesit bağlılığının bulunmasından dolayı çalışmada bu bağımlılığı göz önüne alan ikinci kuşak birim kök testlerinden Carrion-i-Silvestre vd. (2005) tarafından geliştirilen PANKPSS ve Pesaran (2007) tarafından geliştirilen CADF testleri kullanılmaktadır. CADF testi ile elde edilen bulgular serinin durağan olmadığı ve SAGP teorisinin geçerli olmadığını ortaya koyarken, yapısal kırılmaları dikkate alan PANKPSS testine ait bulgular neticesinde ise serinin durağan olduğu ve SAGP teorisinin desteklendiği sonucuna varılmıştır.

References

  • Abu-Lila, Z. ve Ghazo, A. (2018). Testing the validity of purchasing power parity for the Jordanian economy. International Journal of Academic Research in Economics and Management Sciences, 7(4), 192–200.
  • Aytemiz, S., Coşkun, N. ve Tuncer, İ. (2021). Testing the absolute purchasing power parity hypothesis under non-normal errors: Rals-Lm and Rals-Adf unit root tests. Dicle Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 11(21), 57-72.
  • Bahmani-Oskooee, M., Chang, T. ve Lee, K-C. (2014). Purchasing power parity in the BRICS and the MIST countries: Sequential panel selection method. Review of Economics & Finance, 4, 1- 12.
  • Basher, S. A. ve Mohsin, M. (2004). PPP tests in cointegrated panels: Evidence from asian developing countries. Applied Economics Letters, 11, 163–166.
  • Bilgin, C. (2018). Uluslararası ticarette satın alma gücü paritesinin geçerliliği sorunu: Türkiye için zaman serisi analizi. Academic Review of Humanities and Social Sciences, 1(1), 17-30.
  • Breusch, T. ve A. Pagan (1980). The lagrange multiplier test and its application to model specifications in econometrics. Reviews of Economics Studies, 47: 239-253.
  • Büyükkantarcı Tolgay, S. ve Kula, F. (2020). Satın alma gücü paritesinin geleneksel olmayan para politikaları altında geçerliliği: Türkiye üzerine bir uygulama. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Sayı: 55, 1-20.
  • Carrion-i Silvestre, J.L., Barrio-Castro, T.D. ve Lopez-Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. Econometrics Journal, 8(2), 159- 175.
  • Cassel, G. (1918). Abnormal deviations in international exchanges. The Economic Journal, 28, 413-415.
  • Cheung, Y-W. ve Lai, K. S. (1993). Long-run purchasing power parity during the recent float. Journal of International Economics, 34, 181-192.
  • Choudhry, T., McNown, R. ve Wallace, M. (1991), Purchasing power parity and the Canadian float in the 1950s. The Review of Economics and Statistics, 73(3), 558-563.
  • Corbae, D. ve Ouliaris, S. (1988). Co-integration and tests of purchasing power parity” The Review of Economics and Statistics, vol: 70, 508-511.
  • Coşkun, N. (2020). Mutlak satın alma gücü paritesi hipotezi: Kırılgan beşli örneği. Bulletin of Economic Theory and Analysis, 5(1), 41-55.
  • Coşkun, N. ve Ballı, E. (2021). Satın alma gücü paritesinin geçerliliğinin sınanması: OECD ülkeleri örneği. Yönetim ve Ekonomi Araştırmaları Dergisi, 19(4), 1-13.
  • Çağlayan, E. ve Şak, N. (2009). OECD ülkelerinde satın alma gücü paritesi: Panel eş-bütünleşme yaklaşımı. Marmara Üniversitesi İ.İ.B.F. Dergisi, 26(1), 483-500.
  • Doğanlar, M. (1999). Testing long-run validity of purchasing power parity for asian countries. Applied Economics Letters, 6, 147-151.
  • Doğanlar, M. (2006), Long-run validity of purchasing power parity and co-integration analysis for central asian countries. Applied Economics Letters, 13, 457-461.
  • Dornbusch, R. (1978). Monetary policy under exchange rate flexibility. Working Paper, MIT Cambridge, 1-58.
  • Dornbusch, R. (1985). Purchasing power parity. NBER Working Paper Series, No. 1591, 1-34.
  • Edison, H. J. (1985). Purchasing power parity: A quantitative reassessment of the 1920s experience. Journal of International Money and Finance, 4, pp. 361-372.
  • Enders, W. (1988). Arima and co-integration tests of PPP under fixed and flexible exchange rate regimes. The Review of Economics and Statistics, 70(3), 504-508.
  • Erlat, H. (2003). The nature of persistence in Turkish real exchange rates. Emerging Markets Finance and Trade, 39, 70-97.
  • Fleissig, A. R. ve Strauss, J. (2000). Panel unit root tests of purchasing power parity for price indices. Journal of International Money and Finance, 19, 489–506.
  • Frankel, J. A. ve Rose, A. K. (1996). A panel project on purchasing power parity: Mean reversion within and between countries. Journal of International Economics, 40, 209-224.
  • Frenkel, J. A. (1978). Purchasing power parity: Doctrinal perspective and evidence from the 1920s. Journal of International Economics, 8, 169-191.
  • Gailliot, H. J. (1970). Purchasing power parity as an explanation of long-term changes in exchange rates. Journal of Money, Credit and Banking, 2(3), 348-357.
  • Glen, J. D. (1992). Real exchange rates in the short, medium, and long run. Journal of International Economics, 33, 147-166.
  • Guloglu, B. ve Ivrendi, M. (2008). Output fluctuations: Transitory or permanent? The case of Latin America. Applied Economics Letters, 17(4), 1–6.
  • Hakkio, C. S. (1984). A re-examination of purchasing power parity: A multi-country and multi-period study. Journal of International Economics, 17, 265-277.
  • Hakkio, C. S. (1992). Is purchasing power parity a useful guide to the dollar? Economic Review-Federal Reserve Bank of Kansas City, 77(3), 37-51.
  • Karagöz, K. ve Saraç, T. B. (2016). Testing the validity of PPP theory for Turkey: nonlinear unit root testing. Procedia Economics and Finance,38, 458-467.
  • Kim, Y. (1990). Purchasing power parity in the long run: A co-integration approach. Journal of Money, Credit and Banking, 22(4), 491-503.
  • Layton, A. P. ve Stark, J. P. (1990). Co-integration as an empirical test of purchasing power parity. Journal of Macroeconomics, 12(1), 125-136.
  • Li, H., Lin, Z. ve Hsiao, C. (2015). Testing purchasing power parity hypothesis: a semiparametric varying coefficient approach. Empirical Economics, 48 (1), 427–438.
  • Lothian, J. R. (1997). Multi-country evidence on the behavior of purchasing power parity under the current float. Journal of International Money and Finance, 16(1), 19-35.
  • Mark, N. C. (1990). Real and nominal exchange rates in the long run: An empirical investigation. Journal of International Economics, 28, 115-136.
  • McNown, R. ve Wallace, M. S. (1989). National price levels, purchasing power parity, and co-integration: A test of four high inflation economies. Journal of International Money and Finance, 8, 533-545.
  • Nakıpoğlu Özsoy, F. Ve Özpolat, A. (2018). Tüketici fiyat endeksi ile satın alma gücü paritesi arasındaki ilişki: MIST ülkeleri örneği. Mehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi 5(3), 839-848.
  • Narayan, P. K., Narayan S. ve Prasad, A. (2009). Evidence on PPP from a co-integration test with multiple structural breaks. Applied Economics Letters, 16, 5–8.
  • Nusair, S. (2003), Testing the validity of purchasing power parity for Asian countries during the current float. Journal Of Economic Development, 28(2), 129-147.
  • Perron, P. (1989). The great crash, the oil price shock and the unit root hypothesis. Econometrica, vol. 57, 1361-1401.
  • Pesaran, H. (2004). General diagnostic tests for cross section dependence in panels. University of Cambridge Working Paper, 0435.
  • Pesaran, H. (2007). A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics, 22(2), 265-312.
  • Pesaran, M.H., Ullah, A., ve Yamagata, T. (2008). A Bias-Adjusted LM test of error cross section independence, The Econometrics Journal, 11(1), 105-127
  • Sarno, L. (2000). Real exchange rate behaviour in high ınflation countries: Empirical evidence from Turkey, 1980-1997. Applied Economics Letters, 7, 285-291.
  • Sarno, L. ve Taylor, M. P. (1998). Real exchange rates under the recent float: Unequivocal evidence of mean reversion. Economics Letters, 60, 131–137.
  • Serttaş, F. Ö. (2022). Weak and strong form purchasing power parity tests for Turkey. International Research in Social, Human and Administrative Sciences I, 7-22.
  • Shapiro, A. C. (1983). What does purchasing power parity mean? Journal of International Money and Finance, 2(3), 295-318.
  • Şener, Ş., Yılancı, V. ve Canpolat, E. (2015). Satın alma gücü paritesi ve varyasyonlarının Türkiye için sınanması, Uluslararası Yönetim İktisat ve İşletme Dergisi, 11(25), 53-63.
  • Taylor, M. P. (1988). An empirical examination of long run purchasing power parity using co-integration techniques. Applied Economics, 20, 1369-1381.
  • Wu, J-L. ve Wu, S. (2001). Purchasing power parity overvalued? Journal of Money, Credit and Banking, 33(3), 804-812.
  • Wu, Y. (1996). Are real exchange rates nonstationary? Evidence from a panel-data test. Journal of Money, Credit and Banking, 28(1), 54-63.
  • Yazgan, M. E. (2003). The purchasing power parity hypothesis for a high inflation country: A re-examination of the case of Turkey. Applied Economics Letters, 10, 143–147.
  • Yıldırım Tıraşoğlu, B. (2014). Yapısal kırılmalı birim kök testleri ile OECD ülkelerinde satın alma gücü paritesi geçerliliğinin testi. Ekonometri ve İstatistik, 20, 68-87.
There are 54 citations in total.

Details

Primary Language Turkish
Subjects Economics, Finance
Journal Section Research Papers
Authors

Ferhat Karademir 0000-0003-0599-4326

Samet Evci 0000-0002-5854-3847

Publication Date October 29, 2022
Submission Date July 15, 2022
Published in Issue Year 2022 Volume: 7 Issue: 19

Cite

APA Karademir, F., & Evci, S. (2022). MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?. İktisadi İdari Ve Siyasal Araştırmalar Dergisi, 7(19), 421-433. https://doi.org/10.25204/iktisad.1144238
AMA Karademir F, Evci S. MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?. JEBUPOR. October 2022;7(19):421-433. doi:10.25204/iktisad.1144238
Chicago Karademir, Ferhat, and Samet Evci. “MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli Mi?”. İktisadi İdari Ve Siyasal Araştırmalar Dergisi 7, no. 19 (October 2022): 421-33. https://doi.org/10.25204/iktisad.1144238.
EndNote Karademir F, Evci S (October 1, 2022) MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?. İktisadi İdari ve Siyasal Araştırmalar Dergisi 7 19 421–433.
IEEE F. Karademir and S. Evci, “MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?”, JEBUPOR, vol. 7, no. 19, pp. 421–433, 2022, doi: 10.25204/iktisad.1144238.
ISNAD Karademir, Ferhat - Evci, Samet. “MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli Mi?”. İktisadi İdari ve Siyasal Araştırmalar Dergisi 7/19 (October 2022), 421-433. https://doi.org/10.25204/iktisad.1144238.
JAMA Karademir F, Evci S. MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?. JEBUPOR. 2022;7:421–433.
MLA Karademir, Ferhat and Samet Evci. “MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli Mi?”. İktisadi İdari Ve Siyasal Araştırmalar Dergisi, vol. 7, no. 19, 2022, pp. 421-33, doi:10.25204/iktisad.1144238.
Vancouver Karademir F, Evci S. MIST Ülkelerinde Satın Alma Gücü Paritesi Geçerli mi?. JEBUPOR. 2022;7(19):421-33.